Can BlackBerry monetize BBM without massive WhatsApp style losses?
Late last month, tucked inside a Facebook filing, was information that was of interest to anyone who follows the potentially lucrative instant messaging space. The California-based social media giant, which had acquired the flourishing WhatsApp in February for $19-billion (The actual number would rise because the value of Facebook’s stock did), revealed the cold hard numbers on the service, and they weren’t pretty.
For the first six months of 2014, WhatsApp posted a net loss of $233 million on revenue of just $15-million. The numbers may be a bit misleading because the culprit for $206.5 million of the red ink was share-based compensation expenses and the issuance of common stock below fair value. But the report did perhaps ensure that the proverbial two guys in a garage looking to build the next game changing platform might be scared away to apply their talents to gaming or mobile payments or whatnot.
The instant messaging market is at an important stage in its maturity and will likely be defined by M&A contraction in 2015, if it isn’t already. For now, though, entrants are faced with a familiar business conundrum: consumers want to send instant messages to their friends. Companies want to make money from them doing this, but can’t charge for the service because there is too much competition. So they try to make money in other ways. Virtual stickers. Advertising. Sponsored content. All of these seem wanting, or at very best a mere part of the solution to the monetization puzzle.
This week, BlackBerry revealed new BBM features, including a a SnapChat-style timed message feature and another that lets users remove a message before the recipient has read it. The company is rolling out these things for free, but say it may decide to charge later. The move, however, seems to be as much about defense as offense. It’s easy to posit that services such as these have become table stakes in the race for instant messaging eyeballs.
And BlackBerry Messenger is getting more of those eyeballs. In its recent Q2, 2015 earnings report, which covered the three months ended August 30th, the company highlighted the fact that BBM had more than 91 million monthly active BBM users, up from 85 million in the prior quarter. This, of course, is a fraction of the more than 600-million users that WhatsApp boasts.
And it’s here though where the larger business strategies of BBM and BlackBerry as a whole should converge. BlackBerry has a single executable opportunity in front of it that has nothing to do with the teen market Facebook is cultivating with WhatsApp. Nothing to do with stickers or emoticons. And though the company does not back out its numbers on BBM, it’s clear that Chen would have little patience for the dollars involved chasing consumer whims anyway. We have learned, over the course of a year of watching his leadership, that the stealthy Chen hunts with an arrow, not with the spray of a machine gun.
BBM’s real opportunity is in delivering a secure, full featured messaging service to the enterprise market.
The corporate environment of 2014 is practically defined by security scandals. These now happen so often as to not be noticed by the general public. Did you hear that 83-million accounts were hacked at JPMorgan Chase? That was less than a month ago. What about the Staples hack? That was a couple weeks ago.
At the 2014 Mobile World Congress in Barcelona, BlackBerry unveiled eBBM, a service aimed at allowing enterprise clients to use a messaging service that is secure.
“BBM Protected will provide an unrivalled level of trust in enterprise messaging with end-to-end encryption of messages that uses symmetric encryption keys for BBM messages and best-in-class technology for public-private signing and encryption key pairs,” said BlackBerry.
Winning the enterprise messaging app isn’t going to make the news like a lineup at the mall for the new iPhone or the splashy figure that Facebook paid for WhatsApp, for that matter, but it is a good business for BlackBerry right now. We are clearly in an environment where enterprise clients can, and should, pay BlackBerry for the secure solution it is offering them. BlackBerry should take their money.
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Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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